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HomeMy WebLinkAboutCC Minutes - 10/08/01 Work Session MINUTES Eugene City Council Work Session McNutt Room--Eugene City Hall October 8, 2001 5:30 p.m. COUNCILORS PRESENT: Betty Taylor, David Kelly, Scott Meisner, Gary Rayor, Gary Pap~, Bonny Bettman, Pat Fart. COUNCILORS ABSENT: Nancy Nathanson. CITY COUNCIL WORK SESSION In the absence of Mayor James D. Torrey, Council President Taylor called the meeting to order. A. Items from Council, Mayor, and City Manager Mr. Kelly noted the upcoming council interviews for positions on boards and commissions and encouraged councilors' attendance at the interviews. Mr. Kelly asked City Manager Jim Johnson to check on the scheduling of the council's review of the Sears Building Request for Proposals. Mr. Meisner had no items. City Manager Jim Johnson reported on the opening of the Bethel Public Safety Station, which he attended earlier that day on behalf of Mr. Farr. He characterized the opening as a fun event. Regarding the boards and commissions interview process, Ms. Bettman expressed hope the council would encourage the applicants who were not appointed in the upcoming round of appointments to apply for positions on other committees. Mr. Rayor noted recent changes made to downtown street configurations and asked if the council could get a list of the changes that were anticipated. He did not know if the City had publicized the changes in any way. Mr. Johnson indicated that conversions of streets from one-way to two- way were being publicized. Mr. Rayor asked that the council move ahead with the hospital zoning designation for the PeaceHealth Hilyard campus to facilitate changes in the facility. He asked for more information about a proposed alley vacation and how the City Council could facilitate the vacation. Mr. MINUTES--Eugene City Council October 8, 2001 Page 1 Work Session Johnson indicated the council would consider the alley vacation soon; he noted that Mr. Rayor had requested a work session on the hospital designation, and the request needed the support of two more councilors. Ms. Taylor reported on her recent attendance at a meeting of the National League of Cities' Steering Committee on Human Development. She said the committee would recommend that temporary assistance to needy families focus more on getting people out of poverty, not just off of welfare. The committee expressed strong support for a tracking system to see how people progressed after they left welfare. The committee also talked a great deal about education because it was a strong focus for the Policy Committee, which recommended to the steering committee what it should discuss. That generally resulted in committee discussion about the appropriateness of the topic given that most cities do not oversee education. There was concern expressed about testing and schools "teaching for the test." Ms. Taylor said the committee also discussed faith- based initiatives, with strong feelings on both sides. Mr. Pap~ said he followed Mayor Torrey's progress on the New York Goodwill Tour with interest. He wished him a speedy and safe return. Mr. Pap~ asked if, at some point, the City was going to address the complaints made by citizens about the design of Ayres Road. Mr. Johnson indicated that Public Works Department Director Kurt Corey would follow up with a memorandum to the council. He acknowledged that in spite of the public input into the design, some citizens still did not like it, and some design changes had been made in response to complaints. He said that the design did slow vehicles down. Mr. Farr indicated support for the work session request about the hospital zoning designation made by Mr. Rayor, and noted he had submitted a request for a work session on at-large council elections that he hoped other councilors would support. B. Nonproperty Tax Revenue Sources Assistant City Manager Jim Carlson provided the staff presentation. Becky Koble and DeeAnn Hardt of the Central Services Department were also present for the item. Mr. Carlson said that the work session was one of several the council would have on the topic of City finances and potential nonproperty tax revenue sources. Mr. Carlson noted upcoming council work sessions on related topics: on October 17 the council would consider the Budget Citizen Subcommittee recommendations on transportation finance; on November 14 the council would hear a report on special districts; on November 19 the full Budget Committee would meet to hear the updated six-year financial forecast, a report on the multi-year financial plan, and the budget assumptions for the upcoming fiscal year 2003 budget; and on December 10 the council would hold a second work session on nonproperty tax revenue sources and the library levy renewal. MINUTES--Eugene City Council October 8, 2001 Page 2 Work Session Mr. Carlson reminded the council that the City of Eugene was heavily dependent on property taxes for its operating revenues. Property taxes fund about 63.5 percent of the City's operating revenues. He noted that the City had not yet reached the property tax cap created by Ballot Measure 5 and could ask the voters to levy approximately $38 million in local property taxes. Mr. Carlson noted that Ballot Measure 47/50 had set the permanent property tax rate at $7 per $1,000; that could not be changed. The only change in revenue generated from that rate were changes in assessed value, which the measure also limited to a maximum increase of three percent annually. If a recession caused market values to fall below the assessed value, the assessed value would be decreased to match the market value. The property tax rate would then be applied to this new, lower assessed value, resulting in lower revenues. Property tax revenues also increase due to exception values based on new construction and lot line adjustments. Exception values have resulted in increased property tax revenue ranging from 2.2 percent to 2.8 percent over the last several years. Mr. Carlson suggested that in a recession the City could expect very little property tax revenue increase due to exception value as new construction slowed. The combined effect of the exception value and the changes in assessed value totaled about six percent annually, which was about what the City realized under the pre-Ballot Measure 47/50 system. He said that a recession would have a negative impact on those revenues. Mr. Carlson noted that general obligation bond debt approved by the voters was outside the limitations established by the property tax limitation ballot measures. Mr. Carlson called attention to the items included in the meeting agenda packet to provide context for the discussion: 1) Attachment A, an excerpt from the City Council Goals related to the goal of Fair, Stable, and Adequate Financial Resources; 2) Attachment B, a chart entitled Nonproperty Tax Revenue Sources, Overview of Individual Sources; and 3) Attachment C, a memorandum dated September 28, 2001, to the council and mayor from Patricia Boyle, Financial Analyst, entitled Past Attempts to Develop Sustainable Revenue Sources. He provided a brief overview of the memorandum from Ms. Boyle. Mr. Carlson invited questions. Mr. Meisner said it was hard for him to separate the question of a specific alternative revenue source from the City's funding needs. He wanted to make a decision that was based on knowledge of the City's multi-year needs. He also wanted to see information as to what authority the City had locally to adopt an offsetting tax to the property tax. For example, in return for passage of a personal and business tax, the City would no longer tax owner-occupied houses. He asked if the City could exempt a particular category of property from taxation. City Attorney Glenn Klein did not believe the council could make such a choice; it could decide to under-levy across the board, but could not exempt one category of property from taxation. He indicated he would do more research if there was interest on the part of the council. Mr. Meisner reiterated his interest. MINUTES--Eugene City Council October 8, 2001 Page 3 Work Session Regarding the potential of a sales tax, Mr. Meisner said he was interested in such a tax if it could be adjusted. He said that the restaurant tax was a subset of the sales tax, and asked if there were other specialized subsets of the sales tax that other Oregon jurisdictions were using. Mr. Carlson cited the amusement tax as one example. Mr. Meisner asked for an example not listed in the materials given the council. Mr. Carlson indicated he would follow-up with a memorandum. Mr. Kelly said his goal was to establish a taxing system that spread the burden most broadly. He said a taxing mechanism that made the City's revenues less sensitive to the ebbs and flows of the economy would be helpful. He said as part of any new measure, he would like to see the property tax burden on single-family residences reduced, and echoed Mr. Meisner's request for more research on the topic of residential property tax relief. He was interested more in restructuring the current system than in a major revenue increase. Mr. Kelly indicated appreciation for the information provided by staff regarding small, niche taxes, although his interest was in the more broad, general purpose taxes listed. Responding to a question from Mr. Kelly regarding how much of the property tax was paid by businesses and how much by homeowners, Mr. Carlson estimated that of the total (including commercial and industrial), owner-occupied, single-family and mobile home property taxes totaled approximately 41 percent of the assessed value. He said that staff did not have information about assessed value of personal property or centrally assessed utilities. Mr. Pap6 agreed with Mr. Kelly regarding the need for a broad taxing mechanism. The most fair taxes were those that touch all citizens. He did not favor niche taxes and recalled that the County had levied a tax on rental cars. Mr. Johnson suggested that such a tax reflected the cost to the infrastructure system of people from outside the area coming to the area and renting cars. Mr. Pap6 expressed skepticism about the reasoning behind the tax, and noted his support for a personal income tax and a gross receipts tax, as proposed by the Eugene City Club. Mr. Rayor acknowledged the need for more revenues, particularly for street preservation and maintenance. He proposed that the council consider as a criterion for further action what other Oregon cities have done, suggesting that the taxes used by other cities be listed in a matrix that included each tax's yield. He thought it would be useful to know which taxes could be levied administratively versus through a vote. Mr. Carlson replied that as a home rule city, Eugene could implement any of the nonproperty tax revenues by ordinance, but ordinances could be referred by the voters. Mr. Rayor supported the utility surcharge method as a proven taxing tool, particularly for funding street maintenance needs. Ms. Bettman said she would use as general criteria the workability of the tax, its equitability, and the distribution of the tax among the people using the services. For example, those who worked in Eugene and lived outside the city would not be affected by a personal income tax. Such a tax MINUTES--Eugene City Council October 8, 2001 Page 4 Work Session would need to be on people who work, not just live, in Eugene. She also wanted to reestablish the balance of the tax burden on residential and commercial properties. Ms. Bettman perceived that the tax burden had fallen disproportionately on residences, noting that the 41 percent figure cited by Mr. Carlson did not include multiple-family housing. Another criterion she cited was that the tax must be dedicated to a well-defined purpose. Ms. Bettman observed that the description of the amusement tax provided by staff mentioned sporting events, but those were not mentioned in the potential annual yield. Mr. Johnson explained that the University of Oregon would likely be the largest source of revenue for sporting events. The City attempted to get legislation passed that would require the University to collect the tax on behalf of the local government, but the legislation did not make it out of committee. He noted that most such taxes exempt, for example, high school sports. Ms. Bettman asked if there was an alternative to having the University collect the tax. Mr. Johnson did not think so, given that State employees would be collecting the revenue. In response to a follow-up question from Ms. Bettman, Mr. Johnson suggested that an in-lieu-of-tax would no longer be an admission tax. Mr. Farr said that his constituents were not interested in paying more taxes. He was encouraged that the council, as evinced by Mr. Kelly's comments, did not appear to want to increase the revenues collected, but merely spread the tax burden to a larger group of people. He highlighted the need for full citizen understanding of the scope of what the council was talking about. Mr. Farr believed that it might be a negative thing for the City to move ahead on its own with another taxing mechanism, suggesting it would be best to proceed in a regional or countywide fashion so people could not avoid the tax by moving outside the city limits. Mr. Johnson reminded Mr. Farr that the City needed to replace the levies that were soon to expire, and it would be the council's choice as to how the revenues were replaced. Mr. Farr agreed, but said it did not appear the council needed a substantial increase in the City's revenues. Mr. Carlson reminded the council that the six-year forecast generally anticipated a deficit in the General Fund resources in out years, which meant the City had to either cut programs or generate new income. Over the last three years, the council had asked the voters to support new operating levies through the property tax. One of the options could be replacement of the levy dollars, but the City has an ongoing structural problem with the system now in place. Mr. Farr pointed out that through the implementation of strategies forced by Ballot Measure 47/50, the City had become much more efficient. He said that some did not believe the City had done enough, and there was more to be done to become more efficient, and not just by cutting programs but by operating programs more efficiently. While he was not prepared to go into detail, he thought the City was spending money in areas that would be better spent elsewhere. Ms. Taylor thought the City needed money to restore programs that had been lost in the past. She also thought the City needed a more equitable taxing system. Expressing appreciation for the history provided by staff, she noted that often in the past there was a combination of items on a ballot measure that, if presented separately, would have passed. She thought it best to go the MINUTES--Eugene City Council October 8, 2001 Page 5 Work Session voters with one measure at a time. Ms. Taylor was very interested in a property tax exemption or cap for owner-occupied property, and suggested that be placed on the City's legislative agenda. Ms. Taylor asked what happened to the concept of a real estate transfer tax. Mr. Johnson believed the State legislature precluded the City from enacting such a tax for many years to come. Mr. Kelly noted his concurrence with Ms. Bettman's remarks regarding the shift in the balance of taxes between residential and nonresidential properties, and cited some figures from a 1999 article in the Oregon Business magazine in support of that perception. He agreed with Mr. Farr that a regional focus would be best, and encouraged staff to involve Springfield in the discussions to the degree possible. He thought it was becoming evident to the Springfield city councilors that they shared the same issues as Eugene. Mr. Kelly wanted more work done on the City Club's taxing recommendations as well as on a business or corporate income tax. Regarding the information provided on a corporate income tax, he suggested that staff research the impact of including partnerships in such a tax. Regarding the information provided on a gross receipts tax, Mr. Kelly noted a small marginal rate produced considerable funding. He suggested a small rate would be more acceptable to the public. Mr. Kelly indicated interest in more information regarding how a personal income tax could be applied to nonresidents. Mr. Meisner wanted to ensure that funding was sufficient to meet the City's forecast of future needs, such as community policing. He had mixed feelings about dedicating funds to certain uses. If the sum involved was small and the nexus reasonable, that was one thing; if the council was discussing replacing property taxes, he wanted to dedicate funds to public services, but did not require that dedication to be programmatic. Mr. Meisner also agreed with the City Club recommendations. He was not interested in a payroll tax. He had some interest in a general sales tax because it would capture revenues from those traveling through town and using City services. He thought the issue of regressivity could be addressed by proper exemptions. Referring to the agenda item summary, Mr. Meisner questioned the use of the word "equitable" on page 6. He said that "equitably" was a judgment of fairness. Regarding the potential of dedicated revenues, Ms. Taylor said she was generally opposed to dedicating revenues. She said there was many times when there was a need to be met, but the funds available were dedicated to other uses. Mr. Kelly, seconded by Mr. Pap~, moved that, in preparation for the December 10 discussion, the council direct the City Manager to develop additional background materials and proposed implementation plans for the MINUTES--Eugene City Council October 8, 2001 Page 6 Work Session corporate (business) income tax, gross receipts tax, and personal income tax. Further direct the City Manager to propose ideas of how these new revenues sources could partially offset some current property taxes. Mr. Farr reminded all those present of past failed tax proposals, in particular the one percent utility tax. He noted that tax had been intended to be dedicated to the provision of low-income housing, which he considered a worthwhile cause. Mr. Rayor opposed the motion because the taxing mechanisms included had no precedence in terms of local use, and no other Oregon jurisdiction levied such taxes. He did not want to be the first community to impose such taxes. Ms. Bettman could not support the motion unless it included some of the other options mentioned in the staff notes, such as an amusement admissions tax, a business license regulatory fee tax, and a general sales tax. She asked Mr. Kelly to accept those taxes as a friendly amendment. Mr. Kelly indicated acceptance of the general sales tax as a friendly amendment. He said he had been more focused on broad taxing sources and had not intended to exclude the potential of using the other taxing mechanism mentioned by Ms. Bettman for other purposes, such as replacement of the youth levy. Ms. Bettman reiterated her interest in finding a way to levy a personal income tax on nonresidents. Mr. Meisner shared Ms. Bettman's concerns about the original motion but intended to support it with the addition of the friendly amendment. Regarding a general sales tax, he noted that tax was the only one that provided enough funding to replace a substantial portion of the property tax. A one percent tax would generate $19.5 million in 2001. He reiterated his interest in something that mitigated the impact of the property tax. He pointed out that those who use City services but do not live in Eugene would be subject to the tax. He thought there were ways to address the regressivity of the tax. Mr. Pap~ did not oppose the motion but pointed out that he had been personally involved in the support of three sales tax measures that were not supported by the public. He said that choosing that avenue would require a broad, regional approach if it was to succeed. Mr. Farr indicated his concurrence with Mr. Pap~, saying it would be unfair to local businesses that other businesses just a few feet away would be able to sell goods for less because they were located in a jurisdiction without a sales tax. He opposed the motion. Ms. Taylor preferred the motion as stated originally. She thought a sales tax was a very regressive tax. Mr. Meisner said that the sales tax provided an avenue for sharing the tax burden in a small way, and emphasized he was only interested in the tax as a replacement to the property tax. MINUTES--Eugene City Council October 8, 2001 Page 7 Work Session Mr. Meisner asked staff to provide the council with information about jurisdictions using a value- added tax. Mr. Kelly clarified that the council was merely requesting research about the sales tax. He agreed with Mr. Meisner that there were ways to reduce the regressivity of the sales tax. Responding to Mr. Farr's comments, he agreed that a regional cooperation was vital to the success of a sales tax. The motion passed, 5:2; Mr. Rayor and Mr. Farr voting no. C.Work Session: Ordinance Concerning Forfeiture The council was joined for the item by Mr. Carlson and Police Chief Jim Hill. Patty Furlough, the District Attorney handling local forfeiture cases, and City Attorney Glenn Klein were also present for the item. Mr. Carlson provided brief background on the item, noting the changes resulting to forfeiture law as a result of the passage of Ballot Measure 3. The measure's passage had an impact on the City's funding of its Interagency Narcotics Enforcement Team (1NET) because the ballot measure specifically precluded the expenditure of forfeited dollars on law enforcement. The State legislature had developed implementing legislation for the measure; that legislation took effect in July. Mr. Carlson called attention to information included in the meeting packet regarding how INET would be funded as of fiscal year 2003. Mr. Carlson invited council input on the a draft ordinance designed to bring the relevant City ordinances into compliance with State law, and requested direction on whether moneys from forfeitures were to be used for purposes other than drug treatment. Responding to a question from Ms. Bettman, Ms. Furlough clarified that the reference to an "in rem" proceeding on page 35 of the ordinance regarded an action taken against a property rather than a person. Ms. Bettman asked if administrative costs incurred by the City of Eugene were reflected in the forfeiture redistribution formula. Mr. Johnson said a central services allocation was included in the formula to cover those costs. Ms. Bettman said that it appeared the City had the option to use the funds for drug treatment, but did not have to. She asked if the council had the choice of directing those funds to drug treatment or to other General Fund purposes, not including law enforcement. Mr. Johnson said yes. Ms. Bettman determined from staff the forfeiture dollars would show up as revenue the council would need to allocate to General Fund purposes or to drug treatment. Mr. Johnson pointed out that if MINUTES--Eugene City Council October 8, 2001 Page 8 Work Session the funds were included in the General Fund, the council could decide on a yearly basis how much it wished to allocate to drug treatment. Mr. Carlson observed that the City did not generally dedicate fines or forfeitures to any particular purpose. Mr. Johnson cited library fines as an example. Ms. Bettman asked what other jurisdictions were doing with the forfeiture funds. Mr. Carlson said that Springfield and Lane County were taking a similar approach to that proposed by Eugene. Mr. Meisner preferred to keep the funds in the General Fund as opposed to dedicating to them on a permanent basis to another use. That approach gave the council flexibility to use the funds as it chose on an annual basis. He did not want to change the ordinance before the council at this time and preferred to forward it to a public hearing for public comment before amendments were made. Mr. Pap~ asked if the use of forfeiture would be moot given the passage of Ballot Measure 3. Ms. Furlough said that currently, the District Attorney's Office had a 95 percent conviction rate for filed cases. The District Attorney did not pursue forfeiture cases not associated with a criminal case. The District Attorney did not take the property of people not subject to the forfeiture law or who had not been convicted of a crime. She said that the measure had not affected how the District Attorney did business in Lane County; it merely redirected the proceeds to other uses. Mr. Pap~ said that it was his understanding that not all forfeiture cases were drug crimes, so allocating the funding to drug treatment may not be "connecting dollars to dollars.' Ms. Furlough responded that there were different aspects to civil forfeiture. Most in Lane County were related to drug crimes. There were other allowable uses of civil forfeiture, such as for DUll convictions; that were not used in Lane County. Animals and firearms could be forfeited in certain circumstances. Mr. Pap~ agreed with Mr. Meisner that the council should forward the ordinance before it to a public hearing. Any proposed amendments could follow the hearing. Mr. Kelly did not recall any Budget Committee discussion that lead to agreement the forfeited moneys would be directed to the General Fund. He suggested that staff was overstepping in that assumption. Regarding Mr. Meisner's comments that the council could make a choice as to the allocation of funds annually, Mr. Kelly said that if that were really the way the system worked, he would agree. However, he thought it difficult to make such conscious choices when the expenditure "was predecided" in the draft budget. The allocation could be pulled out, but the Budget Committee must then decide what to cut to balance the budget. Mr. Kelly said that according to the Eugene Police Department, drug acrime underlies much of the local crime problem and until that was addressed the council was "dancing" around the edges of the issue. While he acknowledged that the measure itself mentioned "drug treatment or other lawful MINUTES--Eugene City Council October 8, 2001 Page 9 Work Session purposes," arguments in favor of the measure in the voters pamphlet regarding Ballot Measure 3 emphasized drug treatment. He thought the voters were given a sense of the use of the funds by those arguments. Mr. Kelly could not support the ordinance as it was drafted. He asked staff to consider how Section 4.2555(3) could be revised if the council decided to spend the money on drug treatment. In response to Mr. Kelly's concerns, Mr. Rayor suggested the ordinance could be modified to read "funds deposited in the General Fund goes for drug treatment unless otherwise directed." Mr. Rayor asked how the money was tracked to ensure it was not directed to law enforcement. Mr. Carlson said the accounting was similar to that used for the Road Fund. The State highway gas tax money was placed in the City's General Fund and then staff determined if Eugene spent enough on legal road-related activities to account for that amount of revenue. Mr. Rayor thought staff was on the right track in terms of the ordinance, and it was close to its final form. Ms. Bettman was willing to move forward with the ordinance as drafted if it did not preclude the council from using the proceeds for drug treatment, and expressed appreciation for Mr. Kelly's request for alternative wording. She agreed with Mr. Kelly that the problem with the budget process was that funding comes to the council already allocated and the council must make conscious decisions about reallocating those funds to other uses. Ms. Bettman requested a conservative estimate of the funding available if the council decided to direct the funding to drug treatment, how the funds would be allocated, and the best use of those dollars. Mr. Johnson said that a similar question was asked during the budget process. Staff had some information, but as it indicated during the budget review, the County had the expertise in alcohol and drug treatment, and the City had no one on staff with that expertise. Ms. Bettman suggested that the City ask the County for the information. Mr. Carlson noted that some City's funding was directed to drug treatment through the Human Services Commission. Responding to remarks made regarding the budget process, Mr. Carlson said that all the revenue in the General Fund was available for the council to allocate as it pleased. He said that while the City Manager proposed a budget, he did not do so in a vacuum; staff listened to the council over the course of the year and used that direction to formulate the budget. He noted that during the last budget process, many changes were made by the Budget Committee. Mr. Kelly, seconded by Mr. Rayor, moved to direct the City Manager to prepare the necessary information and to set a public hearing date in order to adopt the proposed ordinance. Mr. Meisner recalled that the motion that generated discussion at the Budget Committee was in relationship to funding for the Drug Court, not drug treatment specifically. He questioned if, at a MINUTES--Eugene City Council October 8, 2001 Page 10 Work Session time when the council was discussing a general lack of money, it wanted to increase Eugene's Human Services Commission allotment for drug treatment by another $200,000 annually. The council did not have unlimited money. Mr. Meisner reminded the council that it had decided to reduce its contribution to the Human Services Commission over a three-year time period, and now it was considering giving the commission more. He agreed drug treatment was key to the issue of crime, but wanted the expenditure considered in a broader context. Mr. Kelly asked staff, as it was drafting alternative language, to consider its application as of fiscal year 2003. He said the intent of his request was twofold: he wished to respond to arguments made in support of Ballot Measure 3 that many voters took seriously; and he wanted to determine if an increase in such funding would allow the City to be more efficient with the remainder of its public safety dollars. The motion passed unanimously, 7:0. The meeting adjourned at 7:10 p.m. Respectfully submitted, James R. Johnson City Manager (Recorded by Kimberly Young) MINUTES--Eugene City Council October 8, 2001 Page 11 Work Session